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Sluggish monopolies keeping rail networks on wrong track

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A report commissioned by the Department of Transport found that annual investment in the railways was €291m and that the situation was "not financially sustainable" given the low passenger numbers on some routes

A report commissioned by the Department of Transport found that annual investment in the railways was €291m and that the situation was "not financially sustainable" given the low passenger numbers on some routes

PA

A report commissioned by the Department of Transport found that annual investment in the railways was €291m and that the situation was "not financially sustainable" given the low passenger numbers on some routes

The future of Irish railways depends on realistically considering the investment in a sector which has lost vast numbers of passengers and freight over the past two decades.

A report commissioned by the Department of Transport, 'A Strategic Framework for Investment in Land Transport' found that annual investment in the railways was €291m and that the situation was "not financially sustainable" given the low passenger numbers on some routes.

Passenger numbers peaked at 45.5 million in 2007. One passenger in five has been lost in the decline to 37.6 million in 2014. There were 526 million freight tonne kilometres of traffic in 1999 and 91 million in 2012. Empty freight yards adjoin rail stations from Tralee to Dundalk.

The railway strike last summer confirmed that freight and large events such as All-Ireland semi-finals can operate successfully without the railways. In the recent past, mainline rail passengers peaked at 11.3 million in 2004 and declined to 10.4 million in 2012. This is a little over one return trip per year per head of population in the State.

Mainline rail's single-digit rate of decline contrasts with Dublin suburban rail's decline of 29pc, from a peak of 13.9 million in 2007 to 9.9 million in 2012. The Dart decreased from 20.2 million passengers in 2007 to 15.7 million in 2012.

In each of the three rail passenger markets, the problems facing the railways are stark. All sections of the railway face competition from either Bus Eireann or independent bus companies. The most mature competitive bus route is between Dublin and Galway, with three operators, high frequency, 24-hour operation, faster journey times, significantly lower fares, zero subsidy required, and higher vehicle standards. Passengers on the rapidly growing services of Wexford Bus, JJ Kavanagh, Aircoach, Dublin Coach and Matthews are typically younger than those on railways. The old Department of Transport had a culture of a downtown office of CIE and deterred new market entrants in the bus sector. The appetite for this anti-competitive behaviour has dimmed following the verdict of the Swords Express case, the writings of economists and the stunning success of Ryanair.

In the Dublin region, the ability of the Dart to attract extra passengers is restricted by high property prices and the decline in population in the areas served, with a high proportion of empty nest houses. In the outer suburban service areas, there is now direct service from many points to Dublin Airport rather than taking a train to the city centre. The collapse of the Malahide viaduct diverted many former rail passengers to express bus services on the M1 road.

As railways have lost commercial revenues from both passengers and freight, the Departments of Finance and Transport have chipped in with significant subsidies. The National Transport Authority subsidies report shows €2.02bn of subsidies to Irish Rail between 2001 and 2012. The Irish Rail annual report for 2013 shows capital and operating subsidies to the railways in that year costing over €258m.

We lack in the public sector the economic expertise to analyse whether this annual cost of over a quarter of a billion euro has a benefit-cost ratio to justify that expenditure. The Wright Report was strongly critical of the low proportion of economists (7pc) in senior posts in the Department of Finance during the banking crisis. The Department of Transport has even greater skill deficits. A major flaw in the present Government has been its failure to reform the 'permanent government' and in particular to raise its level of expertise in economics across all departments.

Advocacy and public relations prevail over economic appraisals. Policies, agencies and spending programmes should be openly accountable before public money is spent. Because of our allergy to independent project appraisal, Ireland bankrupted itself to prove that robbing Peter to pay Paul usually gains the support of Paul, his PR department, his tax lawyer and his accountant. So what! The correct criterion is whether the benefits to society as a whole exceed the costs to society as a whole.

In the railway sector, passengers and freight have been going elsewhere. Undaunted railway engineers promote new projects, often counting costs as benefits and treating capital as free. Nostalgic for the days of Santa's toy train sets in their childhood, they would happily double the national debt to fund projects from undergrounds to high-speed trains.

As the current edition of 'The Economist' warns us, "while high-speed rail remains in the grip of sluggish monopolies, its chances of becoming a successful competitive business look poor".

Sean Barrett is an economist and Senator

Irish Independent